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A Market Theory of Money$
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John Hicks

Print publication date: 1989

Print ISBN-13: 9780198287247

Published to Oxford Scholarship Online: November 2003

DOI: 10.1093/0198287240.001.0001

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Supply and Demand?

Supply and Demand?

(p.7) 1 Supply and Demand?
A Market Theory of Money

John Hicks

Oxford University Press

The theories about price-formation in competitive markets, that were available to economists at the time when Keynes was writing, had been the work of the so-called ‘neo-classics’ between 1870 and 1900. All accepted the distinction, that had come down from Adam Smith, between market value and ‘natural’ or normal value, natural value depending on cost of production, market value on supply and demand. Market value would ‘tend’ towards natural value by adjustment of supply. It was accordingly held, for nearly a century after Smith, that natural values were the only values that required attention. The whole of Ricardo's system, to take the most important example, runs in terms of natural values. The chief thing which happened at the ‘marginal revolution’ of Jevons and his contemporaries was a shift of attention to market values. They were determined, it was accepted, by supply and demand. This chapter addresses the question of just how market worked.

Keywords:   supply, demand, market value, natural value, Adam Smith

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